Competition in Canadian Cellular – New Carriers Are Coming

Lost in the excitement of the iPhone launch, the Rogers data plan backlash and the Telus and Bell profit grab has been the news that there will soon be two to three new carriers in each market. These will compete for cellular customers against the incumbents Telus, Bell and Rogers.

This good news for consumers comes as the federal government’s process for awarding new cellular spectrum licenses approaches completion.

Industry Canada initiated an auction for new cellular spectrum this year that set aside part of the spectrum for non-incumbent carriers. The auction is almost complete and the resulting new landscape is becoming evident.

Likely beginning in late 2009 to early 2010, each market in Canada will see the emergence of two to three new carriers.

The incumbent cable companies will begin to offer cellular service in their cable territories: Shaw in the West, Videotron in Quebec and parts of Ontario and Bragg in Atlantic Canada. In addition, Globalive will offer service in most parts of Canada outside of Quebec and a company called DAVE will offer service in large and medium sized cities in Ontario and Western Canada.

The incumbent cellular carriers will prepare well to defend against the new entrants through strategies such as using their flanker brands Fido (Rogers), Solo (Bell), and Koodo (Telus) to take away market opportunity, and by enticing customers into long term contracts.

The new entrants however will still change the dynamic of the market. The strength of the incumbents in the market and the high cost of both the spectrum and network build will force the new entrants, especially the non-cable company entrants, to enter the market aggressively or risk an early demise.

The new entrants are all expected to build GSM technology networks, and Telus and Bell are rumored to be considering a conversion to GSM technology. From a consumer perspective, this means that, as in Europe and other regions, consumers will not have to change their phone every time they want to change carriers. As well, Rogers, by virtue of its GSM network, will no longer have a monopoly on GSM-only phones such as the iPhone.

Additional carrier choice, a single network technology and an aggressive approach to market share should bring better pricing and offers for consumers.